S&P 500 Trims Longest Weekly Advance Since January on Europe

Published 2:18 am, Wednesday, November 30, 2011

Oct. 28 (Bloomberg) -- U.S. stocks fell, trimming the longest weekly gain since January in the Standard & Poor's 500 Index, amid concern that yesterday's rally, driven by a European agreement on solving the debt crisis, went too far.

Whirlpool Corp., the largest maker of household appliances, slumped 14 percent after saying it will cut more than 5,000 jobs and lowering its earnings targets. Cablevision Systems Corp. tumbled 14 percent after the fifth-largest U.S. cable-TV provider by subscribers said profit declined 65 percent. Hewlett-Packard Co. gained 3 percent as the personal-computer maker announced plans to keep its PC unit.

The S&P 500 fell 0.2 percent to 1,281.65 at 2:12 p.m. New York time, after rallying 3.4 percent yesterday. The benchmark gauge was up 3.5 percent since Oct. 21, heading for a fourth week of gains. The Dow Jones Industrial Average rose 5.86 points, or 0.1 percent, to 12,202.69.

"It's clearly not the end of the story for Europe," Kevin Caron, a market strategist in Florham Park, New Jersey, at Stifel Nicolaus & Co., said in a telephone interview. His firm has more than $116 billion in client assets. "We had a rally yesterday to beat the band. There's a bit less uncertainty about the position of the Europeans, but there are lots of details that still need to be worked out."

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Stocks rose yesterday, extending the best monthly rally since 1974 for the S&P 500, as European leaders agreed to expand a bailout fund and U.S. economic growth accelerated. Concern over Europe's crisis sent the S&P 500 to a one-year low this month. The index came within 1 percent of extending its drop from its April peak to 20 percent, the common definition of a bear market. Since then, it has risen 17 percent.

Italy's borrowing costs rose to a euro-era record at a sale of three-year bonds, driving yields higher amid concern that efforts to contain the sovereign crisis won't be enough to safeguard the region's third-largest economy. Fitch Ratings said part of the plan to contain debt turmoil amounts to a Greek default. German Chancellor Angela Merkel said that the debt crisis won't be over "in a year."

European leaders may struggle to maintain the euphoria that drove the euro to its biggest one-day gain in more than a year as scrutiny deepens on their latest attempt to stem the region's turmoil. The weaknesses of Europe's common currency area, ranging from its design to a persisting dearth of bank funding and anemic economic growth, weren't properly addressed in the measures revealed yesterday to stem investor panic, said Harvard University economist Kenneth Rogoff and Jonathan Loynes at Capital Economics Ltd. in London.

Consumer Confidence

Consumer confidence unexpectedly rose in October from the previous month, indicating the biggest part of the economy will help keep the U.S. recovery intact. The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 60.9 from 59.4 in September. The gauge was projected to drop to 58, according to the median forecast of 66 economists surveyed by Bloomberg News. The preliminary reading for the month was 57.5.

A separate report showed that consumer spending in the U.S. accelerated in September. Still, incomes rose less than projected, sending the savings rate down to the lowest level in almost four years.

"While borrowing and spending is what both monetary and fiscal policy keep encouraging, it is savings that is the fuel for healthy economic growth and investment. The decline in the savings rate is not good," Peter Boockvar, equity strategist at Miller Tabak & Co. in New York, said in a note to clients.

Whirlpool Slumps

Whirlpool slumped 14 percent to $52.30. The company's plan, which also includes reducing factory capacity by 6 million units, will cost $500 million and $160 million will be booked in 2011, Whirlpool said. Profit this year will be in a range of $4.75 to $5.25 a share, down from a previous forecast of $7.25 to $8.25, the company said.

Cablevision Systems tumbled 14 percent to $14.94. The company lost 19,000 video subscribers, fewer than the 26,000 average estimate of nine analysts surveyed by Bloomberg. Cablevision's market has a 40 percent overlap with Verizon Communications Inc.'s FiOS, leading to a "hyper competitive dynamic" that makes it difficult for the company to grow, said Todd Mitchell, a Brean Murray Carret & Co. analyst in New York.

Hewlett-Packard rallied 3 percent, the most in the Dow, to $27.80. Chief Executive Officer Meg Whitman is backing away from a spinoff proposal made by former CEO Leo Apotheker, who raised the idea in August as part of a sweeping overhaul. Moody's Investors Service placed the company's credit ratings on review for possible downgrade.

DuPont Rallies

DuPont Co. rose 0.5 percent to $48.98 as people with knowledge of the matter said the company is exploring a sale of its auto-paint division that may fetch $3 billion to $4 billion. DuPont hired Credit Suisse Group AG to seek buyers for the so- called Performance Coatings division, said the people, who spoke on the condition of anonymity because the talks are private. Gregg Schmidt, a DuPont spokesman, declined to comment. A Credit Suisse spokesman declined to comment.

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